A report ranking the world’s top financial centres shows the Cayman Islands slipping in international rankings, down eight spots to 24.
The report – the Global Financial Centres Index, produced by the City of London – aims to give an indicative rating of the competitiveness of each major financial centre in the world and to identify the changing priorities and concerns of finance professionals.
It considers external benchmarking data and five areas of competitiveness, including people, business environment, market access, infrastructure and general competitiveness.
The report shows Cayman’s rating down 40 points to a score of 564 out of a maximum 1,000 points. According to the report, a movement of between 25 and 50 points signifies that the competitiveness of a financial centre needs to be watched.
Love it or lump it
Cayman’s slide seems to have been partly influenced by the polarised responses the jurisdiction evoked from financial professionals that were surveyed for the report. Apparently, many financial professionals have a love it or hate it relationship with the Cayman Islands.
Ted Bravakis, public relations officer with the Portfolio of Finance and Economics, said this is nothing new.
‘We are constantly talking to our clients and what we find is that those that know us, really like us. They appreciate the quality of service providers we have and our regulatory efficiencies.’
‘Those that don’t know us, however, may be reverting to old stigmas and stereotypes about offshore centres and the Cayman Islands,’ he said.
With the city of London report crowning itself No. 1, Mr. Bravakis said some caution is necessary.
‘We know [London] are very active in promoting their leadership but these kinds of studies are good. We don’t look at them in a negative way. We see it as being constructive.’
Cayman Islands Monetary Authority Chairman Timothy Ridley described the report as well researched and valued.
‘The message that comes across loud and clear is that we need to do better at providing consistent, high quality service at a competitive price,’ he said.
Both the Government and the private sector need to promote what they do and provide in more meaningful and effective ways, he added.
Punching above weight?
Cayman was not the only offshore jurisdiction to receive a lower ranking than in the first GFCI. Bermuda also slipped eight positions to 25th, while the Channel Islands slipped three spots to claim position 23. Dubai climbed three spots to 22 while the Isle of Man – which did not even feature in the last GFCI report in March – leapfrogged all the offshore financial centres to claim the top offshore ranking and the 21st overall position.
After the first GFCI report, some observers expressed surprise that tiny offshore jurisdictions like Cayman had even made it into the top 50 list of global financial centres.
‘Some see offshore centres as a weak link in the financial services industry but there is no denying their importance,’ the report’s authors wrote.
‘Offshore holdings are estimated at between $5 trillion and $7 trillion – five times as much as 20 years ago and representing up to eight per cent of total global wealth.
‘The Cayman Islands alone are home to $1.4 trillion in assets. Financial services have served these centres well and Gross Domestic Product per person in these islands is very high.’
Mr. Bravakis said it is important to recognise the distinction between financial centres and financial services centres. First and foremost, Cayman should be seen as a financial services centre, he argued.
‘The industry talks of the Cayman Islands as a financial centre and in many ways we do compete with these other jurisdictions, like London and New York,’ he said.
‘At the same time, we recognise we are not a centre for capital markets – we’re a financial services centre. We enable financial transactions to happen. We help the flow of capital. We make markets efficient but we’re not a place to go to raise capital.
‘So in that light [the ranking is] a validation of our position and in some ways we are punching above our weight.’
The argument that Cayman is punching above its weight is reinforced in a statistic that shows the Cayman Islands has the seventh highest weighted share of international finance – or 3.35 per cent of total global financial transactions. But it also found Cayman’s economy was the most highly specialised in financial services, relating its share in international financial services to its share in GDP.
Compared to other offshore financial centres, Mr. Ridley think Cayman is probably the most broadly based and diversified. But the base could be broadened further by concentrating on three particular areas, he said.
‘First, attracting more open market reinsurance companies. Secondly, attracting more private trust companies. Both of these areas are under active consideration by the government, together with CIMA and the private sector,’ he said.
‘Thirdly, encouraging more physical presence and economic activity in Cayman by the offshore industry and attracting the personnel to make that happen.’
This requires Cayman developing, promoting and implementing much better long term, coherent and consistent policies on a wide range of issues such as immigration, education, health care, and infrastructure generally,’ he reasoned.
London, NY on top
The report found the six top financial centres unchanged, with London inching further ahead of New York as the world’s premier financial centre. Those two cities sit well clear of Hong Kong and Singapore, followed by Tokyo, Zurich and Frankfurt.
Luxembourg was the biggest mover (up nine positions to 17th), followed by Amsterdam and Dublin (both up seven spots) while Wellington (down nine), Cayman, Bermuda, Warsaw, and Lisbon (all down eight) dropped in the rankings.
The report – which is also notable for identifying the Cayman Islands as lying where Puerto Rico rightly belongs on a map – is available at www.cityoflondon.gov.uk